Recent Posts

A new energy power has emerged in a remote, mountainous region
along an international frontier. The residents of this region,
which has an active separatist movement, now
control the flow of fuel into a neighboring jurisdiction, where
political turmoil has halted the extraction of natural resources.

We are talking about Vermont and New York.

International
Paper, which employs around 600 workers at a mill in
Ticonderoga, N.Y., has announced a plan to run
that mill on natural gas instead of oil. This makes a lot of
sense. New York, after all, has large reserves of natural gas
that could be used to run the plant for less money and with less
pollution.

But International Paper will not be using New York gas. Earlier
this fall, New York Gov. Andrew Cuomo effectively blocked his
state’s access to its portion of the estimated 489 trillion cubic feet of natural
gas located in the Marcellus Shale formation, which
stretches from Ohio and West Virginia northeast into southern New
York. Following a wide-ranging, nearly-four-year study of
practically everything related to the drilling process, including
the potential public health hazards of hydrofracking, the
governor made the surprising announcement that the results were
inconclusive. Regulators headed back to square one, and the end
date for the review process slipped years into the future.

As I wrote at the time, the
move allowed Cuomo to appease environmentalists by blocking
fracking in the Empire State for years, if not forever, without
requiring him to take a position against drilling that could
alienate landowners who want to cash in on gas reserves. It was
the same strategy President Obama used last year to head
off any decision on the Keystone XL oil pipeline.

So, instead of using gas from the Marcellus Shale, the edge of
which is no more than a few hundred miles from Ticonderoga,
International Paper will get its gas from wells in Alberta,
Canada, more than 2,000 miles away. The paper manufacturer has
struck a deal with Vermont Gas, a subsidiary of Quebec-based Gaz
Métro, to extend the Vermont Gas distribution system beneath Lake
Champlain to New York, where the IP mill could tap it. The
agreement, however, requires approval after environmental reviews
in New York and Vermont.

Vermont residents may be skeptical. Unlike New York, Vermont does
not have any of its own natural gas resources to develop. The
pipelines run by Vermont Gas reach only a small portion of the
state. In the rest of Vermont, residents cook and often heat
their homes with bottled propane that is delivered to each
household by truck. While Vermont Gas is also seeking to expand
its network to serve a few additional areas in Vermont, the spur
beneath Lake Champlain would simply enable a Canadian company to
deliver Canadian gas to New York, to support jobs and commerce in
New York. This is not likely to be greeted enthusiastically in
the Green Mountain State.

Then there’s a monster to be considered.

Lake Champlain is the reputed home of Champ, or the Lake Champlain Monster. First
“sighted” in 1883, Champ is, unfortunately, as elusive as the
better-known Loch Ness Monster.
Despite more than 300 sightings, there is still no proof of the
monster’s existence. (I was once sent by a feature-hungry editor
to visit towns on the New York side of the lake where residents
claimed to have recently sighted Champ. I came back convinced
they were more interested in spotting tourists.)

This has not stopped those in the region from embracing their
local monster. Champ is the mascot of the minor league baseball
team, the Vermont Lake Monsters, and his alleged image graces
many signs in the region. Champ’s reticence may pose serious
problems for the environmental review boards charged with looking
at the consequences of the pipeline. Without knowing more about
the monster’s physiology, how will regulators determine whether
the pipeline might disrupt his habitat? True, the proposed
pipeline would run beneath the lake bed, not on top of it. But
who’s to say a shy monster in an inland sea does not like to
pretend he is a gopher?

Maybe Champ will make it into the environmental review, maybe he
won’t. I think it’s entirely possible that a few researchers
think the sightings are signs of an as-of-yet-undiscovered
species living in the lake. But either way, Champ may be an apt
symbol for the concerns environmental activists will inevitably
raise.

Natural gas pipelines are quite safe, and the rare but
spectacular accidents do damage when they happen in populated
areas, not beneath bodies of water. In the unlikely event of a
leak beneath the lake, any escaped gas would, at most, simply
bubble up through the water and escape into the atmosphere. There
is no danger of the sort of pollution that could be caused by a
rupture in an oil pipeline. But the environmental crowd has
become convinced that anything related to the burning
hydrocarbons is bad, and some may resort to seeing a log as a
monster to garner support. These “sightings” may not be enough to
stop the project, but they could keep it tied up in regulatory
review.

It’s possible that, even if New York was extracting natural gas
from the Marcellus Shale, International Paper would
find it more cost-effective to tap into the nearby Canadian
network than to create new infrastructure to pump New York gas
northward to Ticonderoga. But using its own reserves would at
least give New York control over its own economic development,
rather leaving it reliant on the whims of its neighbor.

For now, however, Montpelier will have its moment as the region’s
unlikely energy potentate. New Yorkers just have to hope that
Vermonters have never heard the expression “fuhgeddaboudit.”

For more articles on financial, business, and other topics,
view the Palisades Hudson newsletter, Sentinel, or subscribe to my daily opinion
column, Current Commentary.